Competition cuts down Medicare costs by $200 million

Wednesday, April 18, 2012 | 3:43 p.m. CDT

BY
RICARDO ALONSO-ZALDIVAR/The Associated Press

WASHINGTON — A yearlong experiment with competitive bidding for power wheelchairs, diabetic supplies and other personal medical equipment produced $200 million in savings for Medicare, and government officials said Wednesday they are expanding the pilot program in search of even greater dividends.

The nine-city crackdown targeting waste and fraud has drawn a strong protest from the medical supply industry, which is warning of shortages for people receiving Medicare benefits and economic hardship for small suppliers. But the shift to competitive bidding has led to few complaints from those in Medicare, according to a new government report.

The report found only 151 complaints from a total population of 2.3 million Medicare recipients in the nine metropolitan areas, including Miami, Cincinnati and Riverside, Calif.

As a result, the program is expanding to a total of 100 cities next year, along with a national mail-order program for diabetes supplies such as blood sugar testing kits. Eventually the whole country will participate.

Medicare traditionally has struggled to manage medical equipment costs. Officials said the program often paid more than private insurers for comparable equipment and was vulnerable to fraud by unscrupulous suppliers ordering expensive but unneeded products for unwitting beneficiaries.

By shifting to competitive bidding with a limited number of approved suppliers in each area, Medicare will save nearly $26 billion from 2013 to 2022, the government estimates, and reduce costs for seniors without cutting benefits.

"What we see is that costs are lower, and there is no impact on the health status of our beneficiaries," said Jonathan Blum, deputy administrator for Medicare. "This gives us very strong confidence that we can expand the program. To us, this is a clear success."

The home-care supply industry sharply questioned that conclusion.

"With respect to the number of complaints (the report's) information is downright laughable," said Walt Gorski, a senior lobbyist for the American Association for Homecare. "It defies logic." The group represents suppliers of home health equipment, ranging from oxygen to hospital beds.

The industry said hundreds of economists at academic institutions around the country have concluded that Medicare's competitive bidding model is flawed and could lead to shortages or force beneficiaries to use less desirable cut-rate equipment.

In its report, Medicare said it closely monitored the health of beneficiaries likely to use home equipment in the nine areas involved with the competitive bidding experiment. It then compared the results to data for beneficiaries in other similar areas where competitive bidding has not been instituted yet. Using yardsticks such as emergency room visits and nursing home admissions, it found no significant differences.

"We have not seen any change in health status or access to services once the program went into place," Blum said.

The report said the Medicare consumer hotline received 127,466 calls from beneficiaries about the competitive bidding program during 2011, less than 1 percent of the total volume of calls received. Most involved routine matters, such as locating a supplier.

Medicare defined complaints as dissatisfaction that could not be resolved by a call center operator. It registered 151 complaints for the year, the vast majority in the first six months of the program. Only six complaints were logged in the last three months of the year.

Medicare also called a sample of beneficiaries in areas where there was a sharp drop in the quantities of supplies ordered for diabetes testing and for sleep apnea machines. The report said "in virtually every case" the beneficiary reported having more than enough supplies on hand, often several months' worth.

"This would suggest that beneficiaries received excessive replacement supplies before they became medically necessary," according to the report.

The major components of the $200 million saved last year were $59 million from oxygen supplies and equipment, $51 million from mail-order diabetic supplies and nearly $40 million from power wheelchairs and similar devices.